Startups: Get ready to get regulated

• Disruption means someone’s going to be unhappy, thus the need for laws
• Government making an attempt, startups should reach out too

 
STARTUPS have been disrupting a number of industries over the last few years, and have been having a free run at it too – but that’s about to change, warned one industry pundit.
 
“We are all on the same page about fostering more startups in the country, but they need to be aware that they are not going to get a free ticket forever,” said Patrick Walujo (pic above), the head of the startup and technology development body of the Indonesian chamber of commerce (Kadin).
 
“The Government will eventually put regulations in place to make sure startups have their rights, but that they serve the country as well,” he said at Echelon Indonesia, a two-day annual event organised by Singapore’s e27 and Indonesia’s DailySocial, both technology blogs.
 
Patrick, who is also the cofounder of Singapore-headquartered private equity firm Northstar Group, argued that startups need to do due diligence before launching their business.
 
And one aspect of this would be to learn about government regulations.
 
“Regulation is actually good. Human nature is driven by greed and excess, and regulation is needed not to suppress that nature, but to make it more manageable,” he said.
 
“As disruptors, startups need to realise that they are going to make some party unhappy, and this will lead to resistance,” he added, referring to protests by taxi drivers in Jakarta last month, targeted at ride-sharing startups Grab and Uber.
 
Patrick said that startups should expect resistance as the first reaction towards competition, and that this is quite normal in business.
 
“Ask yourself these questions: What are the Government’s objectives in this sector? What does it want to achieve at the national level? What are the things that worry the Government in your industry?
 
“When you have the answers, you can anticipate and build relationships and communicate with the Government – and you’ll have fewer problems to worry about,” he suggested.
 
Slow progress
 
Faced by challenges in key industries like public transportation and financial services, the Indonesian Government has been struggling to formulate the appropriate response in terms of regulations, Patrick admitted.
 
However, it is making the effort, he argued.
 
“As you know, to formulate regulations, the Government would need to coordinate with different bodies and institutions – because that is how things have been done for the past 50 years,” said Patrick.
 
“The Indonesian Government however has realised that this takes too much time, and it is now trying very hard to make this process easier,” he added.
 
Some initiatives it has taken include the launch of the one-stop integrated service agency (BPTSP), which enables companies to take care of processes like getting business and foreign worker permits, company registration, and more, done at one online centre.
 
“We have to keep in mind that our Government is not well equipped to anticipate technology developments,” said Patrick.
 
“There are still uncertainties in the regulatory framework for now, but we hope that by the end of the year, there will be significant progress from last year.
 
“The most important thing is that regulations should not be too stringent – but they definitely need to be put in place, especially for financial technology (fintech) startups,” he added.
 
According to Patrick, the Government has also lowered taxes for startups and small medium businesses from 1% to 0.1% of revenue.
 
Communications and Information Minister Rudiantara has been talking about the 0.1% tax scheme for a few months now, but official documents have not been published yet, so this new tax regime remains unclear.
 
BITS to build bridges
 
Last December, Kadin launched a new body called BITS (Badan Inovasi Teknologi Startup) to oversee startups and the technology sector.
 
Patrick was appointed to lead the new body with the help of technology practitioners and experts in the country, including Go-Jek founder and chief executive officer Nadiem Makarim; Emtek director Alvin Sariaatmadja; Tokopedia founder William Tanuwijaya; and businessman Sandiaga Uno.
 
“It is an open platform created to help startups understand regulations and build relationships with the Government,” said Patrick.
 
Patrick admitted that BITS could not guarantee that it can solve all regulatory issues startups may face, but argued that it would mediate and try to look for the best solution.
 
However, being directly connected to Kadin gives BITS the leverage to take startup problems directly to the Government, he said.
 
“We want to build bridges between both parties, to help startups have a dialogue with the Government and vice versa.
 
“The startup sector is growing rapidly and we all need to work together … to come up with the best regulatory frameworks that can benefit the country,” he said.
 
“It is now a matter of connecting the dots,” he added.
 
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